Using Derivatives to Manage Fixed Income Portfolios

LEVEL: INTERMEDIATE LEVEL

▪	Calculate the theoretical price of derivatives and compare their values
▪	Develop management strategies for the scenarios and constraints at hand
▪	Optimum execution
▪	Figure synthetic exposures and cash exposures into a report

▪	Arbitrage price of derivatives - Intermediate
▪	Synthetic and total exposure - Intermediate
▪	Monitoring portfolio risk - Intermediate
▪	Management and regulatory reporting - Intermediate

▪	Bird’s eye view of the chain of operations involved in a derivatives transaction
▪	Analysis and evaluation of derivatives-based investment strategies
▪	Delivered by specialists combining theoretical instruction and professional experience to reveal the cost-benefit relation behind each decision

▪	Bond managers
▪	Institutional investors
▪	Middle office personnel, reporting staff
▪	Client relationship managers
▪	Risk controllers, inspection
▪	Compliance
▪	Fixed income salespeople

Derivatives: Identification and Pricing

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Typology: Futures, Swaps, Options, CDS

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Cash & carry arbitrage

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Swap pricing

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Black & Scholes: overview and limitations

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Other option pricing methods

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CDS pricing

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ETF, index analysis

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Practical Workshop
. Fair value pricing of various derivatives

Interest Rate Options

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Convertible bonds

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MBS, CMO, IO/PO

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Callable Bonds

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Option Adjusted Spreads

Risk Management and Monitoring Strategies

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Duration/shift exposure

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Currency exposure

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Interest rate curve exposure/shift - wist - butterfly

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Sector/theme credit exposure

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Exposure to correlation: portfolio CDS/CDO

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Volatility exposure: vega-gamma-theta

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Practical Workshop
. Develop strategies for given scenarios

Value-at-Risk (VaR) Approaches

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Historical VaR

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Parametric VaR

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Monte Carlo VaR

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Limitations and alternatives

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Back-testing and stress tests

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VaR (relative and absolute) and UCITS ratios

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Practical Workshop
. VaR calculations and applications applied to mutual funds

Best Execution

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Trade engineering: choosing an instrument

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Stacks and strips: choosing a maturity

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Volatility smile: choosing a strike price

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Practical Workshop
. Identify strategies adapted to an investment strategy and cost-benefit analysis

Risk Control and investment reporting

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Reporting

Total exposure to yield curve risk (cash + synthetic)

Exposure to currency risk

Exposure to volatility

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Performance Attribution

Pockets and virtual cash allocation

Attribution via spread moves

Processing options

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Practical Workshop
. Analyse a portfolio containing different derivatives and develop a risk and performance report